Common Stock: Metallic Minerals (TSXV:MMG)
Current Market Price: $ 0.75 CAD
Market Capitalization: $ 94.1 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Metallic Minerals Stock – Summary of the Company
Metallic Minerals is a precious and base metals exploration company focused on the acquisition, exploration, and development of mineral properties. They own a large portfolio of exploration stage assets in Canada, which they are actively exploring. Metallic Minerals was founded in 2007 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
Metallic Minerals does not have any properties that are currently producing and therefore does not have any revenue. The company consistently runs a net loss and is likely to continue to do so for the foreseeable future.
For the fiscal year end July 2020 the company had a net loss of $3.2 million, an increase compared to $2.5 million the previous year. Their largest expenses in both years were exploration expenses, which totaled $19 million and $1.3 million in 2020 and 2019 respectively.
Metallic Minerals – Royalty and Streaming Agreements
Several of the company’s exploration stage properties are subject to net smelter royalties ranging from 1% to 4%.
Balance Sheet Analysis
Metallic Minerals has a simple and sound balance sheet. They have sufficient liquidity in the near term and no long term liabilities.
Metallic Minerals – Debt Analysis
As of the fiscal year end July 2020 the company does not have any debt outstanding.
Metallic Minerals Stock – Share Dynamics and Capital Structure
As of December 2020 the company has 125.5 million common shares outstanding. In addition they have 20.5 million warrants and 9 million options outstanding. Fully diluted shares outstanding is around 155 million shares.
Metallic Minerals has a dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
Metallic Minerals Stock – Dividends
The company does not pay a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
Insiders at Metallic Minerals have not made any relevant open market purchases of the company’s stock in the recent past. Although they have exercised options and warrants. In my opinion this provides little or no signal to investors.
Metallic Minerals Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$1.2 million / $2.3 million = .52
A debt to equity ratio of .52 indicates that Metallic Minerals uses a mix of debt and equity in its capital structure, but relies more heavily on equity financing.
Working Capital Ratio
Current Assets/Current Liabilities
$1.5 million / $1.2 million =1.3
A working capital ratio of 1.3 indicates a sufficient, but not strong liquidity position. Metallic Minerals should not have a problem meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$0.75 / $ 0.015 = 51
Based on fully diluted shares outstanding Metallic Minerals has a book value per share of $0.015. At the current market price this implies a price to book ratio of 51, meaning Metallic Minerals stock currently trades at an extreme premium to the book value of the company.
Gold Market – Economic Factors and Competitive Landscape
Gold mining is a highly competitive, capital intensive business. The company will need to compete fiercely for both new projects and capital. However, given the current economic environment of global money printing and zero or negative interest rates, it would appear gold companies are poised to benefit from a strong economic tailwind.
Metallic Minerals Stock – Summary and Conclusions
Metallic Minerals is a solid exploration stage investment opportunity. They own a large land package in a proven precious metals region within top mining jurisdiction. The company is sound financially, although they will need to raise additional capital to continue advancing the project.
Metallic Minerals stock may fit well within a highly diversified gold stock portfolio. However the company’s valuation is relatively high given the stage of the project, and they have significant dilutive instrument outstanding. I would prefer to concentrate my portfolio in more advanced exploration stage projects, with a similar market cap. such as O3 mining.
Disclaimer
This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.
This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.
